I find it only fitting that I will end the January 2010 market review marathon with a review of the market that surprised me the most during the last year: the upper bracket lake access market. I had solid reasoning behind my belief that this market would struggle during 2010, and even while my prediction on the factor that I felt would help lead to the demise of this particular segment did come true, the impact of that prediction was not fully realized. Dating back to 2008, I knew the entry level lakefront market was going to drop in price, and drop significantly. While other brokers pretended a decline wasn’t forthcoming, and instead chose to whip the remaining remnants of softening market into an unnecessary froth, I knew better. The decline in the entry level lakefront market arrived with gusto in 2010, after weakening throughout 2009, just as I figured it would. This break down of the entry level lakefront pricing, in my humble opinion, would have to lead to an even more significant decline in the upper bracket lake access market.
At least that’s what I thought would happen. I even took it one step further and thought that an entry level lakefront market where properties sold in the $1MM to $1.3MM price range would almost certainly have no use for an off-water market in the same price range. The thinking goes that if someone can buy lakefront for $1.1MM, why would someone buy an off-water home for the same amount? While fishing one morning a few years ago, I had an old guy tell me that he could have bought my parents lakefront house in 1970, but “decided against it”. He said that he didn’t like the idea of hearing all that boat traffic…. Seriously. So instead he paid only slightly less for a home far off the lake, a home that has appreciated to about 20% of the current value of my parents home. Nice move old guy on the pier.
Old guys on piers aside, most people who can afford lakefront, will buy lakefront. The reasonable people aside, there were sales this year that truly confused me. Sales that wouldn’t have made much sense in 2006, and certainly made even less sense in 2010. There were 5 total sales this year of off-water properties selling between $800,000 and $1.25MM, with two of those properties selling in excess of $1MM. There were also four lakefront homes that sold in this price range, which means that the buyers of those off-water homes thought their money was better spent on non-lakefront properties. Which would be a mistake from a pure market perspective, in the unlikely event that you’re keeping score at home.
The two high sales in this category were in Glenwood Springs and Loramoor. The Loramoor property had a slip, which is something. The Glenwood Springs property didn’t have a slip, making it the second year in a row that Glenwood has had a sale in excess of $1MM that sold sans slip. Buyers do love Glenwood Springs, but if I’m just looking for a nice house without a view or a slip I can find that in Schaumburg. The sale in Glenwood Springs reconfirmed this market as one where shine and polish and new nuts and bolts mean more to most buyers than location. The location, location, location mantra is catchy indeed, but unfortunately many buyers still see this as a cliche that cannot hold a candle to the lusty gleam of a new Viking range. Needless to say, it wasn’t a buyer of mine who purchased this home, and I wasn’t a fan of the sale. Even so, anyone willing to part with more than a million dollars of their own money to join the Lake Geneva Vacation Home Club is a-okay in my book.
This upper bracket market was dead for most of 2010, and for nearly all of 2009. The life came during the fourth quarter of the year, and a few late sales saved this market from a mediocre showing. I remain surprised by the activity in the $900k-$1.2MM range, a range that has caught me off guard based on that firm belief that lakefront should always be the goal if the dollars are the same. 2011 doesn’t look so hot for this market, as currently off-water inventory in the $1MM range doesn’t do much to excite me. I’ve always loved the giant Loramoor stable/house, and for sub-$900k I’m a fan, even if the annual heating bill is equivalent to the GDP of Nicaragua. The Congress Club offerings have been getting cheap, and I fully expect a sale or two in that venerable development during 2011 as well. Better start working with me if you’re interested in any of those offerings. There are a few others that I like, but ambivalence is my most easily accessible attitude, and I employ it in this price range more often than not. Get me talking about entry level Geneva lakefront homes in the same price range and my ambivalence will turn to feverish itchiness so fast it’ll make your lake-loving head spin.